Trade Share CFDs for your favourite companies and 50+ U.S. stocks. Click here.
Refer a friend
Title Icon

Intermediate

Have a basic understanding of Forex, but not sure how to
level up? We have got you covered.

Top Continuation Patterns

Understanding market trends enables traders to place successful entry and exit orders. Continuation patterns can help confirm the existing market trends and find the right timing for you to place orders. In this article, we delve deeper into the top continuation patterns.

What are continuation patterns?

A continuation pattern indicates if the current market trend is going to continue in the same direction or not. They help identify ideal exit/sell or entry/buy price levels in the market. The patterns suggest that a short-term price movement will resume and follow the same direction in the long-term.

  • A continuation pattern in an uptrend signals that the prices will continue increasing in the long-term
  • A continuation pattern in a downtrend signals the prices to continue decreasing in the long-term

Continuation patterns occur on all types of time frames like hourly charts, daily charts, weekly charts and yearly charts.

Key elements in a continuation pattern

Existing market trend

The existing trend is the one where the currency pair prices are currently trending before a new pattern forms. When forming a continuation pattern, the current trend provides traders with an expected future market direction.

Future market trend

The future market trend is the same as the existing or old market trend after the continuation pattern has occurred. This provides traders with the ideal entry or exit price levels. If the future or new market trend is an uptrend, it provides traders with buy signals, and if it is a downtrend, it provides traders with sell signals.

Consolidation area

The consolidation price area is when the currency pair prices trade in a specific zone for some time. The price range is between the support level (the level where the falling prices stop falling and start increasing) and the resistance level (the level where the rising prices stop rising and start decreasing).

Breakout level

The breakout level is where the currency pair’s price changes direction and breaks out of the support or resistance level.

Types of continuation patterns

1. Pennants

Pennant patterns are formed during a huge move in the price of the currency pair. This large move is then followed by a consolidation zone where currency pairs trade between a range before breaking out in the same direction as the initial price move.

  • If the large price movement was in the upward direction, the prices would continue increasing after the breakout
  • If the large price movement was in the downtrend direction, the prices would continue decreasing after the breakout
Top continuation patterns graphic

2. Flags

A flag pattern occurs when the currency pair price witnesses a sharp upward or downward movement making the flagpole, and then trade between its support and resistance levels, making the flag’s body. Both of these trends are short-term trends. Thereafter, the currency pair prices witness a breakout in the same direction as the previous trend and start trading in the upward or downtrend direction in the long term.

  • If the flagpole is created during an uptrend, the currency pair prices continue increasing after the breakout
  • If the flagpole is created during a downtrend, the currency pair prices continue decreasing after the breakout
Top continuation patterns graphic

3. Triangles

A triangle pattern is a continuous consolidation pattern that occurs during the middle of a market trend and helps traders identify where the currency pairs are headed in the future. It consists of the currency pair prices narrowing in the short term, followed by a continuation according to the initial trend.

  • If the currency pair prices narrow down after an uptrend, the prices continue to increase after the breakout
  • If the currency pair prices narrow down after a downtrend, the prices continue to decrease after the breakout
Top continuation patterns graphic

4. Rectangles

A rectangle pattern is formed when the prices move strictly between the currency pair’s support and resistance levels. The particular pattern indicates that there is no trend currently. But as soon as a breakout occurs, the prices start trending according to the initial trend (that occurred before the consolidation period) and out of the rectangle.

  • If the rectangle is formed after an uptrend, the prices break above the resistance level and start increasing
  • If the rectangle is formed after a downtrend, the prices break below the resistance level and start decreasing
Top continuation patterns graphic

5. Cup and handle

The technical price pattern, cup and handle resemble exactly its name – a cup and a handle. The cup is a shape of a ‘u’ or inverted ‘u’, whereas the handle is either a continued downtrend or uptrend. In this pattern, the prices slowly start decreasing or increasing, followed by an opposite trend direction in the short-term, before a breakout occurs in the initial trend’s direction.

  • During a downtrend, the currency pair prices decrease in the short term before increasing for a short period of time, followed by a downtrend breakout
  • During an uptrend, the currency pair prices increase in the short term before decreasing for a short period of time, followed by an uptrend breakout
Top continuation patterns graphic

6. Wedges

Wedges are chart patterns that are formed by converging price lines. Both the price lines move in the same direction, almost parallel to each other before a breakout occurs. These lines are drawn by connecting a currency pair’s high price points and low price points.

  • If a wedge occurs after a downtrend, the price breaks below the support level to continue decreasing
  • If a wedge occurs after an uptrend, the price breaks above the resistance level to continue increasing
Top continuation patterns graphic

Top 12 continuation patterns in forex

1. Ascending triangle

An ascending triangle is a bullish continuation pattern that is created by joining the higher highs and higher lows of the currency pair prices. The two lines joined together form a triangle with a price breakout in the upward direction. It provides traders with ideal long or buy signals.

2. Descending triangle

A descending triangle is a bearish continuation pattern that is created by joining lower highs and lower lows of the currency pair prices. The two lines joined together form a downward sloping triangle with a price breakout in the downward direction. It provides traders with ideal short or sell signals.

3. Bullish pennant

A bullish pennant pattern is an uptrend continuation pattern that is formed as a currency pair makes higher highs in the market. The currency pair price trades within a range for some time before breaking above the resistance level and continuing the uptrend. This pattern helps traders identify ideal long or buy signals.

4. Bearish pennant

A bearish pennant pattern is a downtrend continuation pattern that is formed as a currency pair makes lower lows in the market. The currency pair price trades within a range for some time before breaking below the support level and continuing the downtrend. This pattern helps traders identify ideal short or buy signals.

5. Bullish flags

Bullish flags are formed during an uptrend when the prices are continuously increasing before showing a slow consolidation in the short term. The consolidation period ends as soon as the currency pair prices break above the resistance level to continue the uptrend and provide traders with ideal entry signals in the market.

6. Bearish flags

Bearish flags are formed during a downtrend with the prices continuously decreasing before showing a slow consolidation in the short term. The consolidation period ends as soon as the currency pair prices break below the support level to continue the downtrend and provide traders with ideal exit signals in the market.

7. Bullish rectangle

Bullish rectangles are an uptrend continuation pattern in which the currency pair prices trade between their resistance and support levels in the short term before breaking in an upward direction. This pattern provides traders with the ideal price levels to place a buy order.

8. Bearish rectangle

Bearish rectangles are a downtrend continuation pattern in which the currency pair prices trade between their resistance and support levels in the short term before breaking in a downward direction. This pattern provides traders with the ideal price levels to place a sell order.

9. Bullish cup and handle

Bullish cup and handle patterns resemble a ‘u’ shape cup followed by a handle that is made from a series of falling prices. A price breakout occurs as the handle ends and prices start increasing again, following an extended uptrend. Traders receive a signal to enter buy positions at the end of the pattern’s handle.

10. Bearish cup and handle

Bearish cup and handle patterns resemble an inverted ‘u’ shape cup followed by a handle that is made from a series of increasing prices. A price breakout occurs as the handle ends and prices start decreasing again, following an extended downtrend. Traders receive a signal to enter sell positions at the end of the pattern’s handle.

11. Bullish wedges

Bullish wedges are an uptrend continuation pattern that is formed by lower lows and lower highs in the market. The prices begin to contract in the downward direction and trade between the support and resistance levels before reaching a point of breakout. After this point, the prices continue to increase again. This pattern provides traders with the ideal signals to enter a trade.

12. Bearish wedges

Bearish wedges are a downtrend continuation pattern that is formed by higher highs and higher lows in the market. The prices begin to contract in the upward direction and trade between the support and resistance levels before reaching a point of breakout. After this point, the prices continue to decrease again. This pattern provides traders with the ideal signals to exit a trade.

How to trade a continuation pattern

1. Identify the existing trend

The first step to trade a continuous pattern is to identify the existing trend, as it would provide you with an idea about the future market trend. If you identify an uptrend, prices are most likely to break above the resistance level, and if you identify a downtrend, prices are most likely to break below the support level.

2. Look for the period of consolidation

The period of consolidation is when the currency pair prices trade between their support and resistance levels for some time before breaking in a downward or upward direction. When currency pair prices break below the support level, it confirms a downtrend, and when they break above the resistance level, it confirms an uptrend.

3. Identify ideal entry or exit levels

Once the currency pair prices have traded in the consolidation zone for some time, it is time for you to identify the ideal entry (buy) or exit (sell) levels in the market before the breakout. During an uptrend, the ideal entry level is at the resistance level, and during a downtrend, the ideal exit level is at the support level.

4. Place the order before the breakout

Place the entry or exit orders as per the existing trend before the breakout occurs to make the most of the continued trade. You can also place stop-loss orders right at the breakout level.

5. Monitor markets thereon

After you have made an entry or exit decision, keep monitoring the markets thereon in order to closely analyze where the currency pairs are headed in the future. If the pattern continues in the same direction, you can hold onto the trades. However, if you feel the market can potentially reverse, make a trading decision opposite to what you had initially decided. This means, place an exit order if you entered a buy trade during an uptrend and place an entry order if you placed a sell trade during a downtrend.

Start trading continuation patterns today and place ideal entry or exit orders

Continuation patterns definitely help traders make a decision on whether they want to exit a trade or enter it. The patterns help confirm the trade’s future direction based on its existing direction. Start trading with our platform today to get hands-on trading experience with all the tools, techniques and strategies required to place successful trade orders.

Recommended Topics

  • What are Volume Indicators

    Volume in the forex market can be used to determine the upcoming market trends. Volume indicators are forex trading indicators that can identify if the volume for a particular currency pair is high or low, providing traders with market continuation and reversal signals

  • Shooting Star Candlestick Pattern

    The Shooting Star Candlestick Pattern can identify bearish market reversals and provide traders with ideal price levels to short or exit the trade.

  • Top Trading Chart Patterns

    Predicting future currency pair prices help in confirming market continuation and reversal signals.

  • What is Slippage in Forex Trading?

    Slippages occur when a currency pair order is executed at a price different from the set market order price.

  • Buy limit vs Sell Stop Orders in Forex

    Placing buy limit and sell stop orders help employ a price control strategy on forex trades. Let's take a look at buy limit vs sell stop orders.

  • The Best Time Frame For Forex Trading

    A time frame is a designated time period where forex trading takes place. Time frames can be measured in minutes, hours, days, weeks, months and years.

  • Top Technical Indicators in Forex

    Technical indicators are a market direction signal based on the current and historical price movement of a currency pair that provides traders with future price expectations

  • How to Ace Divergence Trading in Forex

    The forex market is all about timing your trades well. Divergences give traders a market reversal signal right before a price trend changes

  • How To Trade Forex With Japanese Candlesticks?

    A Japanese Candlestick is a technical analysis tool used to analyze the currency pair’s price movement in the forex market.

  • Top Momentum Indicators To Analyse Trend Strength

    Momentum indicators are technical analysis tools that determine in which direction the market is headed and how strong or weak the ongoing trend is

  • Types of Moving Averages Every Trader Should Know

    Moving Average is a technical indicator which averages out currency pair prices in a specific time period in order to accurately identify market trend reversals and support-resistance levels.

  • 8 Popular Intraday Trading Indicators

    Intraday Trading Indicators help place successful short-term trade orders in the forex market.

  • What is the Tweezer Candlestick Formation?

    The Tweezer Candlestick formation is a reversal pattern that indicates either a market top (strong uptrend) or market bottom (strong downtrend)

  • Average Directional Index

    The ADX is a strength indicator that measures how strong or weak a particular market trend is.

  • How to Use Elliott Wave Theory For Forex Trading?

    The Elliott Wave Theory analyses a currency pair’s long-term price movement in the forex market.

  • What are Pivot Points in Forex

    Pivot Points help traders identify market reversals. With Pivot Points, traders can predict the support and resistance levels of a currency pair to make entry and exit decisions.

  • Keltner Channel

    Keltner Channel is a technical indicator that provides traders with strong continuation signals and trend directions by assessing a currency pair's price volatility.

  • Leading vs Lagging Indicators

    Leading and lagging indicators help traders measure the future and current performance of a currency pair, respectively. These indicators can help make successful trading decisions.

  • What is Relative Strength Index?

    Relative Strength Index (RSI) helps traders understand how frequently the currency pair prices change in the forex market to predict the future market prices.

  • Wide Ranging Bars

    Wide Ranging Bars are strong momentum indicators that help traders understand the market direction and identify ideal entry and exit points.

  • Harmonic Price Patterns in Forex

    Harmonic Price Patterns allow traders to predict future price movements and trend reversals to make ideal entry and exit decisions in the Forex market.

  • Double tops and bottoms

    Double Tops and Double Bottoms chart patterns help traders identify solid bullish and bearish trend reversals in the Forex market, and in turn, find the ideal market entry and exit points.

  • Falling and Rising Wedges

    When you are trading currency pairs in the Forex market, it is essential to know when the market can possibly reverse. The Falling and Rising Wedges pattern help identify market reversal signals and accurate market entry and exit points.

  • Forex Scalping Strategy

    Scalping refers to trading currency pairs in the Forex market based on real-time analysis. With Forex scalping, you hold a position for a very short period and close once you see a profit opportunity.

  • Symmetrical Triangle Pattern

    Symmetrical Triangle Patterns help identify market breakdowns (price fall) and breakouts (price rise), and in turn, help you plot the entry and exit prices for profitable Forex trading.

  • Introduction to Technical Analysis in Forex

    Technical analysis in Forex trading provides you with significant market trends, reversals and fluctuations and in turn helps you long and short term trades.

  • Trading breakouts and fakeouts

    Breakout and fakeout trading enable traders to take positions in rising and falling markets.

  • Fundamental Analysis in Forex Trading Explained

    Fundamental analysis in Forex trading is one of the several methods you can use to determine the relative security and intrinsic value of a nation’s currency.

  • 8 Top Commodity Trading Strategies

    Commodity trading is one of the best ways to diversify your portfolio and protect yourself from losses incurred due to inflation.

  • What is a Doji Candlestick?

    The Doji Candlestick is a pattern used in technical analyses of trend reversals in a market.

  • Moving Average: The Complete Guide

    Moving Average is used in Forex trading to compare the current currency pair pricing and where it stands with respect to the current average pair prices.

  • What is Volatility Index (VIX) and How Do You Trade It?

    One of the most popular trading markets in the world, the foreign exchange market allows investors to make quick money by trading currencies.

  • Forex Profit Calculator

    On average, a Forex trader can make anywhere between 5 to 15% of the initial amount they invested in the market.

  • Understanding markets gaps and slippage

    The foreign exchange rate reveals valuable details about particular currencies a trader wishes to trade-in.

  • What is a pip in forex?

    When trading in the Forex market, you need to have a close eye on two currencies at the same time. PIP helps you denote the change in a currency pair’s value.

  • Introduction to order types

    Order types in Forex trading determine and control how you enter and exit the market.

  • Using orders to manage risk

    Forex risk management includes a robust set of rules and regulations that protect you against Forex's negative impacts.

  • Managing risk in 7 steps

    Risk management in Forex is essential to individuals, groups of individuals, and organizations since it enables them to implement measures that help mitigate Forex risk and its negative impact.

  • Bullish and Bearish Flag Patterns

    Blueberry Markets discusses why it is essential to study the bullish and bearish flag patterns in Forex. Learn more.

Learn Icon

Advanced

Master risk management and
become an expert forex trader.
Move on to the advanced course.

Guide to Forex
Trading indicators.

Enter your details to get a copy of our
free eBook

Thank you, please check your inbox for your ebook.

Ads BG

Start a risk free
demo account

News & Analysis

Catch up on what you might
have missed in the market.

Runner graphic

Ready to trade at
Blueberry Markets?

Your best trading experience
is a click away